Customer Life Cycle Management
CRM Success Means Managing
the Customer Life Cycle
Elizabeth Shahnam
META Group
http://shahnam.CRMproject.com
CRM must evolve to a customer life cycle management approach,
encompassing and integrating all customer interactions and channels.
T
he fundamental vision of CRM involves
enterprises using technology to create
competitive advantage through:
• Sales and marketing resource optimization
• Superior customer relationships
• Service excellence
This vision, however, is hampered by the
fact that the CRM market remains largely
fragmented, with point solutions clustered
around each of the multiple, separate segments that touch an enterprise’s customers.
These include:
• Call centers
• Web/electronic presence
• E-mail response
• Direct sales and indirect sales
• Campaign Management
While the Web/electronic presence segment,
or e-channel, has received a great deal of
attention, only a minority of consumers utilize this channel on a regular basis. Further,
while such Internet/electronic businessenabled CRM will continue to grow during the
next two years, more traditional channels
will remain critically important for most
enterprises. Keeping these channels isolated
is problematic because automation of traditional channels is critical in creating hybrid
selling systems and avoiding channel conflict.
Most companies also are failing to create a
cohesive vision for their CRM initiatives.
Often, CRM is assumed to be a single purchased software package. In other instances,
organizations have either purchased or
developed disparate e-business and CRM
products, services, and solutions that do not
“play” well together. Many email response
and Web click-through data collection systems, for example, do not integrate easily
with analytical marketing applications.
Clearly, it is time to organize the fragmented
customer channels – and the CRM solutions
supporting those channels – into a cohesive
whole. To mitigate risk of project failure,
enterprises must master the notion of CRM
as a business philosophy enabled by a component architecture or ecosystem.
Understanding ETFS
The key to integrating the myriad efforts
underlying many CRM initiatives involves
understanding the touch points that occur
within the customer life cycle. These touch
points fall into four categories, or patterns:
Engage, Transact, Fulfill, and Service (ETFS).
Engage
This is where advertising or marketing
efforts create initial awareness of the organization or product offering. The Engage
process is fundamentally about “funnel management,” or generating leads and converting them into customers. However, there is a
very important Engage activity that may start
in the service process: cross-sell/up-sell.
What may start as a service request may end
as an Engage activity.
This discipline falls predominantly into
the domain of CRM, with sales automation
and campaign management as the principal technology applications. There are
Engage activities, including Web-based
|personalized interactions and electronic
catalogs, which primarily support the echannel. However, some Engage functions
cross all customer channels.
Transact
In the transact process, customers actually
purchase the product offering. Related
Transact activities include product and sales
configuration, pricing, and order management. Tightly coupled, bi-directional integration with order management applications is
a requisite technology step in the Transact
process pattern to provide a seamless commerce environment, whatever the channel.
Elizabeth Shahnam, META Group’s Vice President and Director, Infusion: Customer Relationship
Management, is a leading authority on CRM applications and related enterprise architectures.
138 • Defying the Limits
Fulfill
The Fulfill category is where the offering is
delivered to the client. This may consist of a
product being physically shipped to the customer, or in the case of an electronic product,
this may simply be an electronic transfer.
Fulfilling a service may involve consultants
coming onsite to complete a project, or a utility offering such as telephone or electrical
service being turned on.
Service
Another process predominantly in the CRM
domain, Service is the final stage of the customer life cycle and typically involves helping the customer work with the product
offering. To do this, the organization must
provide support functions ranging from troubleshooting to replacement. Other Service
activities include issue tracking/resolution,
self-service, and cross-sell/up-sell. CRM
technologies supporting this process pattern
must support multiple points of interaction,
so customers can use whatever interaction
capability they find most appropriate. The
notion of “continuous customer satisfaction”
is fulfilled in this stage as well.
The fundamental point here is that when
a business interacts with its customers, customers inherently perceive the business as
being able to support these four life cycle patterns. They also expect this support to be
consistent, and the flow among the patterns
to be transparent – in other words, they don’t
even realize it’s happening.
To realize the full potential of CRM, businesses must optimize around the customer
life cycle of ETFS, and manage customer
relationships across that life cycle. Within
this broader life cycle reside different patterns of customer interaction, indeed ETFS
instantiated differently for different customer segments. Called customer patterns,
customers can engage, transact, fulfill, and
service with a business using different
channels, different technologies, and different points of interaction. A business must be
Customer Life Cycle Management
ready to support all those channels, technologies, and points of interaction at a
consistently high level. Once that occurs,
then the organization can get down to the
business of supporting its most valuable customers more effectively, using the delivery
mechanisms which those customers prefer.
Conversely, the least valuable customers
can be shifted to the most cost-effective
ETFS mechanisms.
Customer Life Cycle Management
Many organizations have matched existing
sales, service, and marketing functions of
their business to the ETFS patterns of the
CRM life cycle. There is a basic understanding that Engage equals marketing, Transact is
simply sales, and so forth. Where many
organizations can come up short is in realizing that sales, service, and marketing impact
every pattern in the customer life cycle. Any
interaction with the customer should involve
the sales, service, and marketing functions in
some way. CRM applications must be developed with that realization in mind.
This is fundamentally different from the
organization of many businesses. Sales, service, and marketing are often three disparate
business functions, each of which may have
its own business processes. Moving from the
isolated organization of traditional sales,
service, and marketing functions to a fully
realized CRM vision demands common data
models and databases that provide a
panoramic view of the customer and facilitate organizational convergence.
Sophisticated enterprises can actualize
this CRM vision through a systemic
approach called customer life cycle management (CLCM). CLCM is a three-domain
business system, aligning business
processes, technologies, and the customer
life cycle. This business system must integrate sales, service, and marketing
processes as well as the CRM technology
environment with the customer. To fully
realize the potential of CRM, business systems must be optimized around ETFS patterns – with the customer as the design
point, not the technology or process. CRM
business systems must align these three
domains in ways that are predictable,
repeatable, and measurable. These systems
should be clearly defined, thus enabling
predictable business activities to be automated and leveraged by technology.
The domains that need to be aligned
within the CLCM approach include:
Customer Life Cycle Patterns
This category includes the ETFS patterns discussed earlier.
Sales, Marketing, and Service Processes
Business processes involved in acquiring and
retaining customers. These include:
• Selling channels
• Service, support, and customer care
capabilities
• Marketing programs, including advertising, promotion, direct marketing,
and product marketing
The CRM technology ecosystem
This includes operational, analytical, and
collaborative CRM applications. As with the
EFTS customer lifecycle, the boundaries
between these applications are not always
clear cut. The operational side of the CRM
equation consists of “customer facing”
applications integrated among the front,
back, and mobile offices: sales force
automation, enterprise marketing automation (EMA), customer service/support, and
miscellaneous components.
Operational and collaborative data feeds
analytical CRM applications. Data created on
the operational side of the equation is analyzed for the purpose of business performance management. This side of the architecture is typically tied to a data warehouse
architecture, and is most often manifested in
analytical applications that leverage data
marts. However, operational application vendors increasingly provide analytical applications or partner with analytical application
vendors. Data warehouse and EMA initiatives
can be at odds from an IT architecture perspective, as the marketing applications typically utilize an embedded proprietary database and data model. The IT organization,
then, must facilitate architectural convergence with the enterprise DW – not just with
marketing applications, but with all types of
packaged analytical CRM applications.
Collaborative CRM applications include
the customary collaborative applications,
such as email, workflow, and content publishing/management. In a CRM context,
these applications are used to facilitate interactions between an organization and its customers or partners. These interactions center
on customer information. Collaborative CRM
applications are used to improve communication and coordination, and to increase
customer intimacy and retention.
In a fully realized CLCM approach, these
disparate systems are integrated to enable a
panoramic view of the customer – as well as
to provide the customer with a richer view of
their dealings with the business. Customercentric organizations not only value pre-integration in the CRM technology ecosystem,
but they are willing to pay a premium for it.
CLCM will continue to evolve during the
next 1-2 years, eventually encompassing the
entire spectrum of customer interactions.
Relevant CLCM metrics, which currently are
virtually invisible in the vast majority of
CRM implementations, will include acquisition and retention costs versus five-year to
10-year revenues.
Implementing CLCM will be difficult and
expensive. For a full implementation
across all geographies, lines of business,
and channels, a Global 2000 company can
expect to spend as much as $250 million
over the course of a two-year to three-year
implementation period. Integrating the
technology will be also challenging.
However, dealing with the organizational
and cultural issues will prove to be the most
difficult task.
As far as integrating other customer/sales
channels, call centers are just beginning to
be integrated to create a holistic or
panoramic customer view. And of course,
these must all be linked to “back office”
systems that manage customer order fulfillment, product availability, service management, and other functions both within the
enterprise and with partners in the supply
chain. The result of this disparate technology purchasing is that different parts of an
enterprise are dealing with the same customer and are unaware of other interactions
that have already taken place.
Nevertheless, organizations must get
beyond a single-channel tunnel vision of
CRM, and support the broad spectrum of
channels and points of interaction with CRM
efforts.Users should integrate the three CLCM
domains all with the customer as the design
point. A holistic view of CRM that embraces a
CLCM approach can enable hybrid selling,
service, and marketing systems, which in
turn can lower costs, increase revenue, and
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optimize customer lifetime value.
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