How CRM Strategy + CRM Software = 3X ROI
- Customer Relationship Management is a business strategy to grow mutually beneficial and profitable customer relationships at scale. That's essential because achieving customer affinity is one of only four sustainable competitive advantages.
- Good customer relationships are a leading indicator to increased customer purchases, referrals, customer lifetime value and retention; all factors that deliver significant revenue growth.
- Research shows that when CRM strategy precedes CRM software implementation, the project is 2.5 times more likely to be successful and delivers 3 times higher return on investment.
A Customer Relationship Management strategy defines the optimal approach to achieve customer and revenue objectives using CRM software. Most often that means a specific approach to improve customer relationships, increase customer acquisitions, grow customer share and increase customer retention. And do these things at the least cost and in the shortest time.
The best CRM strategies capitalize on core competencies, integrate competitive advantages, use data to deliver differentiated customer experiences and position the brand relative to competitors.
Then they go deeper to engineer the user, customer and business outcomes that deliver the improved customer relationships and increased revenues. They focus on the methods and processes that produce the outcomes that most matter and avoid wasting time with activities that don't.
The overarching goal of Customer Relationship Management is to achieve customer affinity – which means knowing your customers better than your competitors, and using that knowledge to better serve them, build relationships with them and earn their loyalty.
Knowing your customers better than your competitors and having relationships with them creates customer affinity, which is one of only four sustainable competitive advantages. It's also a differentiator that is not easily duplicated by competitors or displaced by new technologies. In fact, growing mutually rewarding customer relationships creates a connection that can withstand disruptive technologies, competitor encroachment and the erosion of other competitive advantages.
Some research findings demonstrate the substantial financial impact of CRM strategies.
Research from the CRM Benchmark Report affirms three things that analysts have been telling us for years.
First, CRM strategy and CRM software are not the same thing. They are synergistic together but mostly ineffectual apart. Second, the number one correlation most closely associated with Best-in-Class business performance was having a documented strategy. And third, when that strategy defines the enabling technology, and not the other way around, the CRM program was 2.5 times more likely to be successful and delivered 3 times higher return on investment.
The research found that the Best-in-Class leaders (i.e., the top 15 percent) were 2.5 times more likely to have a documented strategy that defined the software design, execution and pursuit of prioritized objectives.
The significant differences among performance archetypes made this finding stand out. When this measure was then compared to technology ROI and company revenue performance it demonstrated a direct connection to financial outcomes.
The data supports something we've anecdotally observed for three decades; that a strategy is the road map that prioritizes objectives and compares alternatives to find the most direct route to the revenue or other business outcomes.
The data shows that depending on your company's strategy – whether you have one or not, or if it's partial or complete – the same software investment will yield wildly different benefits and payback.
For those seeking strategic, sustainable CRM success, a strategy is a compelling starting point.
A Proven Approach
It's important that the strategy engineer user, customer and business outcomes.
User goals are many and varied. They usually start with an application that is easy to use and delivers a positive user experience. But more importantly, the strategy defines how the technology enables improved performance, productivity and personal goals.
Customer outcomes may include goals for innovative products, rewarding customer experiences, customer self-service or stand out customer support.
Business outcomes are quite often things like increasing customer acquisitions, customer share and customer retention. Things that directly move the needle on the P&L statement.
Technology delivers the highest user adoption, software utilization and ROI when the strategy identifies a clear path from user activities to business outcomes.
When strategy fails to define the outcomes that most matter, or the supporting software fails to deliver those outcomes, the CRM program will become marginalized, yield an anemic ROI and fail to become sustainable. To prevent this, the best way to identify and prioritize user, customer and business goals is with a Design Thinking workshop.
The Point is This
A Customer Relationship Management strategy is a lot like a road map. It identifies your (steady-state) baseline performance which is your starting point, then defines your destination in SMART (specific, measurable, actionable, realistic and timebound) user, customer and business outcomes, then designs the processes to achieve those target objectives in the shortest route, and then applies technology to bring automation, information and reporting to achieve efficiency and scale.
Notice how technology came at the end? When companies skip the strategy road map, design of prioritized business outcomes, redesign of business processes, and jump right into the technology, they apply technology for technology's sake, and the CRM system fails to achieve business outcomes that matter.
It's defining the destination, or the identification of target objectives that most matter where most companies fall short. Instead of identifying measurable and meaningful business objectives such as – the CRM program will use sales methods to achieve a 5 percent increase in customer acquisitions, a 7 percent growth in customer share and a 10 percent increase in customer retention, less informed implementors simply install the application and hope for the best. However, hope is not a credible business strategy and configuring software in a vacuum is not going to achieve measurable objectives that move the needle on the P&L statement.
And that's unfortunate because creating a strategy is not a big effort.
Strategy is about 5 percent of the effort and journey to sustained CRM success. That said, it is a precursor to everything that comes after. Great execution won't get you very far if your strategy is wrong. But a solid strategy leaves the remaining 95 percent of the journey to be tackled with clarity of focus, measured execution and the realization of targeted objectives that most matter.