Once you have defined what customer relationship management (CRM) means to your organisation, you need to build a business case for CRM that defines measurable and tangible objectives for the programme. The key to the success of a CRM programme is to ensure that you can in fact MEASURE your progress.
It`s difficult to stand in a boardroom and illustrate increased competitive advantage or improved customer service. But if you define your objectives according to criteria that can be quantified, you will be in a much better position to monitor and report back on progress.
The broad objectives for a CRM programme in most organisations involves one or more of the following: increasing customer retention, reducing operating costs, reducing customer acquisition costs, increasing the average lifetime value of customers and gaining competitive advantage through customer information.
The trick is to define measurements within these objectives to ensure the programme will produce tangible and measurable results. These measurements may be financial, or based on improvement or reduction rates of key business criteria.
Your CRM objectives should look something like this (hypothetical examples):
1. We want to reduce customer churn from the current monthly rate of 3.8% to 2.2%.
2. We want increase the average product penetration per customer from 2.8 products to 3.7 products within 18 months.
3. We want to reduce the average cost per customer contact from R15.97 to R6.11.
The overriding objective of a CRM programme is to build up your customer knowledge and use this to maximise the value of your customer base. Within this, however, there needs to be commercial objectives that can be isolated and measured.
Customer value
One approach is to look at the concept of customer value. Organisations are traditionally measured by profit or market CAP, but these measures give little indication of the future value of the company based on the future value of its staff, skills and knowledge, and specifically its customer base.
Measuring customer value means looking at the value of the customer to your organisation over their projected lifetime; often referred to as the lifetime value of a customer.
WARNING: Looking at this measure of customer value may radically change the way you approach certain groups of customers.
Measuring customer value should include several factors like:
. What products do they currently buy/have from you? (Current product holding.)
. How long will they remain a customer? (Expected retention rate/lifetime value.)
. What else could/will they buy from you? (Projected value of product extension.)
. How many customers will they refer to you? (Value of referrals.)
Your CRM objectives could be aimed at improving one or more of the above measurements in order to increase customer value.
Real-life examples
To illustrate how organisations have set and realised measurable results, here are some practical examples of key measurements achieved through CRM programmes in organisations around the world.
. Pharmaceutical industry: Increased average order size by 26%.
. Cellular industry: Retained 25% of customers who had cancelled their contract.
. Life insurance industry: Achieved a 2% increase in customer retention.
. Credit card industry: Achieved 24% over budget for cross selling.
. Home loan industry: Reduced arrears by 48%.
. Healthcare industry: Reduced the contract lapse rate by 73%.
. Business systems industry: Reduced sales costs by 12%.
The measurement criteria that you set will depend on your industry, your company circumstances and your ultimate objective. A strong business case, with quantifiable and tangible measurement criteria is the next step towards your CRM goals.
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