Interview: Simon Knox and Stan Maklan
Customer Relationship Management:
Perspectives from the Market Place
SMC
Hello, this is Steve Macaulay and this is a Cranfield School of
Management Podcast. Customer relationship management or
CRM promised so much, and appears to have delivered so little.
I am here today to talk about CRM to two of the authors of the
book Customer Relationship Management: Perspectives from
the Market Place. Simon Knox and Stan Maklan – I will start
with you Stan, why did you write this book?
SM
Well, as you mentioned in your introduction massive investment
in CRM has not always led to improved customer experience or
better financial return. The theory had not necessarily provided
the guidance, or if it was developed, it was insufficiently
developed. So we thought we could learn from best practice;
we broke CRM down into some prime components and we
provide examples of best practice in each component. So the
cases we use in the book cover a wide range of industries in
B2B and B2C.
SK
I think also we were very aware that many practitioners regarded
CRM as a database manipulation activity and from our
perspective we are very clear that it was a people issue and a
process issue as well. So in our book we make clear, I think,
that it is a combination of technology, people and processes that
are required to make CRM work effectively and efficiently.
SMC
That is very interesting. Thank you for that comment Simon.
So what would you like people to get out of this book Stan?
SM
Well, I guess the first realisation hopefully people will make is
that there is no one roadmap, there is no ‘here are the five steps,
you follow the prescription and guarantee you are going to get a
better result’. CRM is very context specific, the context of the
company, the context of the market that you are in, etc. So you
need to look at your individual situation and you need to work
with your customers, developing an ideal – or if not ideal – at
least a better basis of working together. So we illustrate how a
comprehensive CRM programme might break into a few core
areas and readers of the book will start to understand the
challenges and the opportunities in each of those areas, but it is
up to the managers to contextualise their own situation and
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Simon Knox and Stan Maklan
relate it to the examples and concepts that we present.
SK
I would also add that CRM in many senses has been developed
through the IT folk without a business. Stan and I are both
marketing people and therefore what we wanted to do was
present a more marketing orientated approach to CRM
development and, in our view, without customer insight, without
knowledge of customers, and going into the future, then it is
highly unlikely that companies will succeed without very effective
CRM systems, so a marketing orientation to the CRM approach
we regarded as an essential additive component.
SMC
I mean one of the interesting things – we have mentioned a
couple of times IT – if you Google CRM you will get no end of
entries about database companies and software companies.
Isn’t it really a rather outdated concept this idea of databases
and CRM?
SM
Well, yes. If you look at CRM as an acronym, people have said
well, CRM dated or not dated and people have played with
replacing it as an acronym, but in fact it has such currency that I
think it is a rather pointless exercise. I think we just need to be
clear that we understand what we mean by customer relationship
management. There was, as you mentioned earlier on, a wave
one of great enthusiastic investment – it hasn’t always led to
delivery of the promises. We are certainly seeing now a more
mature, more balance wave two, which is more grounded in,
which Simon suggested, marketing and customers and customer
value and less related purely to IT. So we are seeing a
maturing of the CRM. If you look at the data there is no let up in
the investment behind CRM programmes, CRM solutions – you
see companies with managers now with the title of Director of
Customer Insights, so you still see a tremendous belief in
investment in this whole area – it’s just, I think, we are hopefully
a bit more mature about what we can expect and how we go
about it. Having customers is not an option for most
businesses. You have customers you are going to have to
manage them, or at worst you have to ignore them, but you need
some sort of policy for them and therefore, I think, the objective
of managing your customers in a systematic fashion with clear
objectives and understanding those who you need to invest in
and those who you can’t afford to invest in as much. I think that
will carry on. I don’t see a way around that really.
SK
I totally agree. I think there is also added pressure on business
leaders to be accountable for the investments they make. So
CRM on the one hand is an investment, but on the other hand is
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a conduit to better management of investment returns. For
instance, understanding the profitability of your customer base,
how much to invest in key accounts based on what profit they
are generating at the moment and perhaps potential profit in the
future. CRM enables that kind of conversation, I think, which
previously had been lacking. So accountability and complexity
of business developments through multiple channels, through
multiple customer linkages, means that we have to have one
view, one message around our customer base and I think CRM
can help in formulating that policy or that strategy.
SMC
I am very interested in getting to, if you like, what the practitioner
would say is what is a successful CRM, what is not successful –
you hear all these scare stories, you don’t hear that many
successes. Tell me, from a practitioner perspective, because I
know both of you are not just academics, but that you have
actually done it for real.
SM
I think the real discriminators here are the quality of your
customer insight that you as an organisation have. The
development of the appropriate capabilities within the
organisation and frankly some time and persistence. I am not a
big believer and my research suggests that the big bang
approach to CRM may work. I think that if you don’t really know
what your customers want from a relationship and you haven’t
tested out if you can engage with them meaningfully in a different
manner, and if you don’t have the capabilities, if you have always
been a product or transactional marketing type organisation, it is
a high risk to spend a lot of money quickly and drive through a lot
of changes very quickly, and how you handle your customers.
So start with insight – why does the customer want to have a
relationship with you? What is in it for the customer? I don’t
want a relationship with the provider of my aluminium foil for the
kitchen frankly – I don’t see the basis of it. Maybe that is an
absurd reaction. But you have can have transactional
relationships with suppliers you like without having the interactive
relationship with them. So there has to be something in the
relationship, there has to be something in it for the customer.
How important are you, the organization, to them? How will
they react to your offers and stimuli? It takes time to build up
this insight. It doesn’t come automatically from having a data
warehouse and data mining tools. You need to spend time, you
need to spend the effort on it. And that really takes me to the
second key determinant of success and that is about marketing
capabilities. You need to have the capabilities, you need to be
able to learn from customers and you need to be able to respond
to that which you have learnt and you cannot get that learning
just from a software package. It is the people skills, it’s the
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management capabilities around that. So there is no point really
in engaging in CRM, in engaging in a cycle of learning from
customers if you, as an organisation, are unwilling or unable to
respond to that which you have learnt. So you need to have
both the insight about customers, the capability of learning from
them and responding to them and then it takes time because
depending on the context, depending on the interest in your
category, depending on the nature of your relationship, offering
new ways of working together may take time for people to take
up, may take time for you to learn, may take time for you to
respond. So you need a bit of patience and persistence. My
research suggests the fact that companies that start with their
capabilities, start with the insight and capabilities, learn what
works and then extend and expand the programme over time,
have a greater chance of success than those that don’t and
obviously will have a lower risk because they are not investing all
of their money up front.
SK
Just building on Stan’s point about trial – I totally agree that in
developing a CRM strategy, trial is critical. In other words
investing a little bit, learning, assessing and then reinvesting as
the understanding and knowledge develops. And a practical
example that we were involved in a few years back was BT
Commercial Division where they developed a CRM approach on
a trial basis with a number of major customers and what they
learnt from that was how best to manage those customer
relationships more effectively and what was so interesting about
this trialling and learning was they were able to serve customers
more effectively and at lower cost, which of course is the gold
standard. So in BT, the commercial arm of BT, this proved to be
very successful and then was subsequently rolled out across a
broader category of customers. So trialling, learning,
reinvestment is I think critical.
SMC
So picking up that word investment Stan, do you feel there are
any rules that you can apply to investing in CRM?
SM
Well, maybe not rules, maybe more of an approach. Typically
you see these big IT led change programmes, it’s all about
saying OK the whole company has to be committed, the top
management, the big budget, let’s drive through the change
programme. It’s not the way, for example, venture capitalists
work and I would look at… sometimes these investments in CRM
are akin to a venture capitalist. If you go to a venture capitalist
they will look at you, what is the quality of your abilities, how
good is this idea – here is a little bit of money, come back in a
few months and show me what you have done. That’s
interesting, here is a bit more money, do some more. Here’s a
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bit more money, show me some real customers. It’s very much
knowing how much to fund it to allow the idea to prosper and
develop, to build the capabilities and when you scale up the
investment and that is the trialling things that Simon mentioned
before. Think about a venture capitalist, think about options
pricing type approach of models. Think about learning about the
customers, investing enough so you can learn and respond to
some customers anyhow, read that, build the management
systems around that experience so that it is sustainable, that it
can be scaled etc. and build it up over time. I guess the advice I
would give is don’t be in a hurry, don’t rush into it, because
learning is by nature an interactive and time consuming process,
and invest behind the learning and development, as opposed to
invest up front and hope to heck that the learning comes at the
end of it. So I would think more of a venture capital as an
investment perspective than a typical large investment with a
discounted cash flow at the end of it.
SMC
So, if I look to the future then where is CRM going and what
advice would you give business leaders?
SM
Well, as I mentioned before, hopefully if you are a business your
customers aren’t going away and you need to manage them.
So I don’t think CRM is a fad or a trend, we will manage
customers one way or t'other, whatever three letter acronym we
wish to do it under. I see the big trend now is about this whole
customer insight piece. Companies are spending a lot more
time and effort on truly understanding what different types of
customers want and the sort of customer experiences they would
like to have and how best the organisation can deliver them. I
would suggest that managers tolerate a bit of experimentation
and learning – and that means diversity. It means that perhaps
the development of your CRM isn’t neatly summarised on one
powerpoint slide with a few neat boxes and arrows between the
boxes. You might have different programmes and different
experiments going on in different parts of the organisation.
Ultimately those involved in managing the customer experience
will come together around a view of what best practice is, but I
think perhaps we shouldn’t be too managerial, too top down
driven imposing a one size fits all solution – allow a bit more
experimentation and learning to develop and I think that is the
way that successful CRM is taking off right now.
SMC
Simon, have you anything to add?
SK
Yes, I would just add to this the internal perspective. I think it is
very important that business leaders view these experiments that
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Stan has talked about – without top support for a CRM system,
albeit an experimental or trial approach, it is doomed to failure.
It is a change management process and if the change
management isn’t guided and endorsed by the top team then it’s
going to disappear as some sort of functional activity. So even if
it’s a small experiment it has to have exposure at the top level if
CRM is going to have a resonance for change for a more
customer focused business.
SMC
That is a very useful note, I think, to end on. So Stan, Simon,
thank you very much indeed.
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Cranfield School of Management
Produced by the Learning Services Team
Cranfield School of Management
© Cranfield University 2008